Introduction »

CIS problems

There have been a series of cases over the last few months regarding decisions by HMRC to refuse to allow taxpayers to be paid gross within the Construction Industry Scheme (CIS).

One particular case illustrates some of the issues. HMRC wrote to the taxpayer, stating that the tax treatment for CIS purposes would change from a gross payment position to payment under deduction of tax with effect from 90 days from the date of the letter unless there was an appeal.

The reason for HMRC’s decision was stated as follows:

• the self assessment first payment on account due on 31 January 2007 was not paid in full until April 2007 and
• the contractor’s monthly return for 5 May 2007 was outstanding.

The individual stated that he was distracted by personal problems in the nature of serious health problems affecting both himself and his immediate family and then work commitments and that these were the causes of the payment being made late. The taxpayer was 61 years old and argued that the withdrawal of gross payment status was likely to result in his having to close down his business, with no prospect of employment.

The Tribunal held that the taxpayer had both shown a reasonable excuse for his failure and that he had made the payment on account without unreasonable delay after the grounds for the excuse had ceased. The excuse consisted of the inability to make the payment on account without prejudicing his business cash flow and the stress suffered by reason of his health and other personal problems in the nature of family illnesses. However, in many of the other cases taxpayers have not been so lucky and have lost their gross payment certificates.

If you are experiencing any difficulties in meeting your tax obligations, it is far better to talk to HMRC before they talk to you. Please do get in touch if you have concerns about this issue.

Introduction »